161:, interest is calculated and paid at set intervals (for instance annually or semi-annually). However ownership of bonds/loans can be transferred between different investors at any time, not just on an interest payment date. After such a transfer, the new owner will usually receive the next interest payment, but the previous owner must be compensated for the period of time for which he or she owned the bond. In other words, the previous owner must be paid the interest that accrued before the sale. This is generally done in one of two ways, depending on market convention:
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215:. This enables the accrued interest to be included in the lender's balance sheet as an asset (and in the borrower's balance sheet as a provision or liability). However if the accounts use the market price as derived by method 2 above, then such an adjustment for accrued interest is not necessary, as it has already been included in the market price.
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On the other hand, if the sale is made during a short set period immediately before the next interest payment, then the seller, not the buyer, will receive the interest payment from the issuer of the loan (the borrower), and
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In addition to the quoted price, the buyer pays the seller an additional amount equal to the interest accrued up to the date of sale,
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the quoted price, the difference reflecting the interest accruing between the sale date and the next interest payment date,
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That adjustment is not made, but the value of the interest to be accrued is simply reflected in a lower quoted sale price.
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That adjustment is not made, but the value of the accrued interest is simply reflected in a higher quoted sale price.
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The main variables that affect the calculation are the period between interest payments and the
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is computed and recorded at the end of each accounting period, perhaps by means of
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The primary formula for calculating the interest accrued in a given period is:
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generally requires (in order to present a true and fair view) that
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493:used to determine the fraction of year, and the
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519:Definition for loans by peer-to-peer lender
16:Money earned on an investment with interest
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423:{\displaystyle T={\frac {D_{P}}{D_{Y}}}}
263:{\displaystyle I_{A}=T\times P\times R}
154:payment if there has been one already.
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49:adding citations to reliable sources
486:is the number of days in the year.
157:For a type of obligation such as a
381:is usually calculated as follows:
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359:is the annualized interest rate.
541:Liability (financial accounting)
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143:that has accumulated since the
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319:is the fraction of the year,
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180:The buyer pays the seller
517:What is accrued interest?
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479:{\displaystyle D_{Y}}
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551:Settlement (finance)
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60:"Accrued interest"
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374:{\displaystyle T}
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56:Find sources:
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495:date rolling
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43:Please help
38:verification
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530:Categories
501:References
201:accounting
195:Accounting
148:investment
71:newspapers
513:for bonds
255:×
249:×
182:less than
145:principal
101:July 2007
536:Interest
133:interest
219:Formula
131:is the
125:finance
85:scholar
432:where
272:where
152:coupon
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135:on a
92:JSTOR
78:books
159:bond
141:loan
137:bond
64:news
199:In
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186:or
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472:Y
468:D
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